Country Note Book

of Taiwan
International Marketing

Submission Date
6/17/2013

Assignment On
Country Notebook of Taiwan
Course Code: International Marketing (MKT 408)
Sec: 3

Prepared By
MD. Anisur Rahman
ID: 2006-1-10-112

Prepared For
Husna Ara
Senior Lecturer
Department of Business Administration
East West University

East West University

Taster
Taiwan an island in Eastern Asia is located 320 km north of the Philippines and 150 km east of
Mainland China. With an area of 35980 square kilometers, Taiwan borders the East China Sea,
the Philippines Sea, the South China Sea and the Taiwan Strait. It did not exist as a separate
entity before it was thrust onto the world scene in 1949. In that year it became the focus of the
continuing struggle for control between the mainland Communist China and the Chinese
Nationalists. Since then, Taiwan has built a modern, internationally oriented and a very dynamic
industrial economy, largely from scratch. Despite its small size, Taiwan is the 14t h largest
trading economy in the world, its trade having grown at an annual rate of almost 15 percent since
the late 1970s. It was ranked third in the world among newly industrialized countries according
to the 1993 World Competitive Report.

Geographical Setting
Taiwan comprises of the proper Taiwan Island, Kinmen (Quemoy), Matsu, Penghu (the
Pescadore Islands) and dozens of other smaller islands. The main island of Taiwan, slightly
smaller than the Netherlands is about 394 km long and 144 km at its broadest point. Taiwan is
largely mountainous and this occupies half of its total area. It is estimated that only 30% of the
area is arable. The island is poor in natural resources and has only few strategic resources which
are inadequate to meet its domestic requirements. It enjoys an oceanic and subtropical monsoon
climate, with long, humid summers and short, mild winters. Taiwan realizes that due to its
unfavorable land and natural resources it has to develop its strategic advantage using technology
as its main factor condition.

Political and Legal System

It has a multiparty democratic system. The legal system is based on civil law and it accepts
compulsory International Court (IC) rulings but with reservations. It is making the transition to a
more open and democratic political system after years of authoritarian rule, although it maintains
a core of stability within its pro-business government. It has five highest organs of the central
government, and the country is administered by the President and the National Assembly. From
March 1996, the President is popularly elected. Taiwan was expelled from the United Nations in
1971, and the Peoples Republic of China (PRC) or commonly termed as the Mainland China
joined the UN Security Council. In 1979 the USA switched diplomatic recognition from Taiwan
(Republic China) to the PRC. Most countries maintain a defacto embassy in Taiwan but for some
Latin America countries with whom official diplomatic relations have been set up. Panama
remains its most important diplomatically.

The Education System

The Taiwanese have high regards for scholarly attainments. A larger proportion of the population
now gets higher education. It has a special and supplementary school system running along the
mainstream educational system. The supplementary school supports vocational education and
adult education programs. Remedial classes covering basic job skills are also arranged at training
centers. Literacy rate is low at 6%.

Population and Social Pattern

Its population of 21,471,000 (1996) speaks three main Chinese dialects of Mandarin (main),
Taiwanese and Hakka. 10% of the population is concentrated in the capital city of Taipeh and
one third of the population lives in Taiwans major cities which are located in the western coastal
plain. Taiwans inhabitants are mainly ethnic Chinese, although there are significant historic and
social differences between the 84% of them, who are classed as native Taiwanese (including
14% Hakka) and the 14% who are identified as late 1940s mainland Chinese immigrants. Some
2% are classed as non-Chinese aborigines.

Environmental Scanning for Market Entry Strategy

Environmental Scanning for Market Entry Strategy requires firms to consider the factors like
Demographic, Economic, Competitive, Technological Change, and Cultural Variables. It is very
important for foreign companies wanting to enter Taiwan to understand the areas where business
concentrates (only in a few cities in Taiwan) and the economic conditions. Major markets of
Taiwan are Taipeh, Kaohsiung, Tai Chung, Tainan, Hsinchu and Keelung. Since Taiwanese are
moving towards a more sophisticated society from the simple type, the customers, are
demanding sophisticated products, commonly imported brands. An MNC may hire the services
of a Research firm to conduct a thorough environmental scanning, specific to a product or
service. A too generalized approach is not likely to work.

Communication Issue-Barriers of Communication and Halls Silence

Language
The Taiwanese are basically imbued with the Chinese culture. Foreigners doing business in
Taiwan would face barriers in effective communication. These include: Language barrier
different type of language and dialect (Mandarin, Hokkien), Personal barrier-due to individual
strengths and weaknesses; Organizational barrier-the local and foreign staff might not be in good
terms. Cultural barrier - different Taiwanese working habits and the role of both explicit and
implicit communication style. Perceptual barrier-the more direct approach of western
businessmen can be construed as rude compared to the more subdued way of the Taiwanese. ?
Value System barrier-Confucian based family and value system compared to the more

decentralized family system of the west and class consciousness. In Taiwan one must also
understand the concept of Halls Silent Language. This includes:
(a) Language of Time-Taiwanese put a lot of emphasis on time.
(b) Language of Space i.e. proxemics Closer contact and eye-to-eye distance are preferred in
Taiwan denoting your closeness to the family network system.
(c) Language of Thing-Giving gifts are highly looked upon.
(d) Language of Friendship Business negotiations in Taiwan start up with a-know-you
session before the actual negotiations. The Taiwanese must receive the message of your
warmth in starting the business.
(e) Language of Agreement-After the deal has been concluded handshake, exchange of gifts and
banqueting are firmed signals of the positive conclusion of discussions.

Business Customs and Ethics

Taiwanese view business as their life blood; and the outside world is the key to their success,
growth and stability. Taiwan follows a strategy of increasing exports to the Western world, and
also to the world at large, in order to maintain de facto legitimacy and its real economic
importance to these countries. The strategy works and almost every country of the world
maintains a trade mission or representative in Taiwan to serve as de facto embassy, falling short
of giving her an official recognition. Taiwan today has been classified as a New Industrialized
Country (NIC). Standards of living have increased steadily. To understand how this Taiwan
Miracle has been accomplished, it is important to understand the Taiwanese Business Mind and
the other facets of doing business with them.

Conservative Style
The typical Taiwanese businessmen are down to earth type, having relatively simple work style,
but known for their shrewd negotiating skills. The styles are shaped from their early poverty
driven totalitarian sociopolitical system. Most of the top executives are in their forties or fifties,
and they have come from such a background. They are skeptical of the younger generation who
is becoming more prominent in business but has not experienced the hardships era.

Work Virtues
Work is not just a means but is regarded as one of the highest virtues. Working hours are long to
Earn more and more money. There is usually one boss (lao ban) who commands absolute resepct

From his employees. He decides and the employees follow, and on his turn he will take care of
even the employees personal needs. This is based from the Confucian family virtues where the
hierarchical structure has definite ladder for seniority and status.

Small Scale Enterprises

Taiwanese do not like to work for large companies. Skilled and resourceful professionals aspire
to have their own business set-up, however small it may be. To them, it is better to be the head
of a chicken then to be a tail of an ox. Small scale capitalism is a norm in Taiwan. The
advantage for foreigners is that it is easy to find local partners to set-up a business. The
disadvantage is that there is very intense business rivalry that can become vicious in nature.
Small scale is also a norm for the service sector. Taiwanese prefer to shop in these small shops
eventhough Western-style supermarkets have appeared lately. This consumer style leads to
complicated sales network and distribution system.

Confucianism The Basis of Success

The Taiwanese mindset is still being shaped by the basic tenets of Confucianism. Obedience,
age, respect and loyalty are some of the virtues, they uphold. Therefore, an older foreign
businessman has a greater chance of making a breakthrough than a younger person. The family is
the pre-eminent institution in Taiwanese society. One first duty is to the family; and, therefore,
most of the companies are Family-Driven.

Never say never

There is a general reluctance to say something that can be construed as negative. Taiwanese
would likely say what you want to hear rather than what you should hear. This has its own
positive as well as negative effects. It also means that the Taiwanese have to homogenize their
culture and erase many individuality traits. This could lead to less creativity and innovativeness
as well.

Mianzi (Face)
Having face means having a high status in the eyes of ones peers, and it is a mark of personal
dignity. Taiwanese are sensitive to having and maintaining a face in all aspects of social and
business dealings. Therefore, when dealing with the Taiwanese never cause someone to lose
face.
Conversely, face can also be given by praising someone for the good work done in front of his

Superiors or his peers. A persons face is not only of his own but also that of the organization he
represents.

Guanxi (Personal Connections)

In order to market products or engage in cooperative ventures in Taiwan, foreign businessmen
must cultivate connections. Guanxi has its roots in the traditional Chinese concept of family
where individuals are part of the whole collective family. In essence, the Taiwanese possess a
clan mentality under which those inside the clan work cooperatively and view those outside the
clan as potential threats. It is an honor for foreigners to be accepted into a network of personal or
business relations. You form such relations by doing favors and by demonstrating your integrity
and sincerity. On the other hand, one area of business in Taiwan where the importance of
personal connection is minimal is export trade. The reason is that Taiwanese businessmen do
understand that foreigners have little understanding of the Taiwanese society and traditions.

Cultivating Relationship-Matchmaking, Patience

A Taiwanese who does not already know a potential business associate will hesitate to do
business with him until he has had time to get acquainted and size up his associates character
and intentions. The best way to make contact with potential Taiwanese business associates is to
have a mutual friend, serve as an intermediary and introducer. Alternatively, represent yourself
in a trade show. Rushing into business before having established a personal relationship is an
invitation to failure. Be prepared to spend a lot of time deepening and strengthening relationship
through visits, dinner, gifts and doing small favors. The Taiwanese like to deal with the same
individual. Therefore, designate a personable member of the company to act as the face man for
the organization in Taiwan.

Meeting the Taiwanese

Foreigners should display sincerity and respect since Taiwanese attach a lot of importance to
social status. Hence, business card exchange and letter of introductions from well known
business leaders or overseas Chinese can enhance your image. Maintaining eye contact may be
perceived as a sign of aggressive attitude. International business managers should better get an
orientation in nonverbal cues used in Taiwan, and also in other relevant aspects of its culture.

Giving and Receiving Gifts

Taiwanese are inveterate gift givers since it symbolize hopes for good future business or an
appreciation for a favor done. But, foreigners must understand the cultural aspects associated
with gifts. For examples, when a county commissioner and 20 business representatives from US

arrived in Taiwan for seeking business connections, they were taken a back with regard to their
choice of green baseball caps for gifts. The trip was scheduled around the time of elections; and
the green was the color of the political opposition party. In addition, according to Taiwanese
culture, a man wears green to signify that his wife has been unfaithful. While a green hat may
lead to trouble in Taiwan, the green color symbolizes exuberance and youth in other Asian
countries.

Conversation
Taiwanese are curious about foreigners and their habits; and, therefore, their questions are
related to what they themselves consider to be important in life i.e. money and family matters.
Discussion on topics like Chinese politics especially the PRC-Taiwan relations can be sensitive.
Therefore, it should be carefully avoided.

Body Language
Taiwanese often use body language that can be incomprehensible to foreigners or that can be
misunderstood. For example, pointing a finger is considered accusatory, rude or hostile. When
Taiwanese are embarrassed, they cover their faces.

Trade Delegations
Taiwanese are group oriented people; therefore foreigners must take statements for the group and
not as individuals. Have a designated speaker. Taiwanese also accept doing business with
women. Having an interpreter is a big advantage.

Banqueting
Eating is Taiwans number one past time: and knowing about proper banquet protocol
demonstrates your respect to the Taiwanese culture. Arrival banquets, seating positions, using
chopsticks and concluding the banquet all have relevance to the Taiwanese number one past
time. It is then proper for you to reciprocate with a banquet for your host.

Negotiations
The Taiwanese approach is often first to gain a holistic view of the entire proposal, then to break
it down into specific chunks; at which time, concrete issues and problems can be discussed. They

do not like surprise in the negotiations. It may be wise to lay out your basic position at the
beginning time. The Taiwanese are increasingly seen as having unreasonable prices since Made
in Taiwan, once a symbol of low price and doubtful quality, now often means good quality at a
relatively high price. Taiwanese negotiators are shrewd and use many tactics such as attrition,
playing off competitors and controlling the schedule and location (which is common in
Taiwan).The Taiwanese believe in flexibility in scheduling to allow for informal conversation,
making acquaintance with the business partners family, and also dining together.

Contracts
Previously, written contract was viewed as useless. Even now, they still consider a contract to be
a loose commitment to do business, not a document that outlines every aspect of the business.
Some companies prefer to sign on the short principles of the business and letting the details to be
thrashed out by subordinates. MNCs should avoid this, since it commonly creates
misunderstanding later on.

An Analysis from the Standpoints of Management

Taiwans Cultural Diversity EPRG Schema
Any foreigner wanting to market in Taiwan must understand the cultural diversity of the market.
One must understand whether the Taiwanese market is: Ethnocentric (specific to the local
condition), Polycentric (host country based), Regiocentric (regional based), and Geocentric
(based on global requirements). It is believed that Taiwan has moved from Regiocentric Market
orientation towards Geocentric Market orientation. Its low quality and cheap product image in
low tech industry is now moving to an image of higher quality, high tech industry, serving
markets all over the world. Currently each local company develops its own brand for similar
products. A worldwide branding policy is needed if Taiwan wants to market globally.
Furthermore, its requirement to enter the WTO club directs it to the Geocentric approach.

Masculine vs Feminine Society Values

The Taiwanese have more masculine values of success, money and things. This has led them to
become one of the worlds important economic forces. The feminine values of caring for others
and quality of life are also important, primarily due to the inherent value of the society which is
family based and focuses upon local environmental issues.

Influence of Taiwans Culture On Employees WorkRelated

Values and Attitudes the Hofstedes Cultural Model
Based on the Hofstedes Cultural model, Taiwans cultural dimensions can be categorized as
follows: It is based on Collectivism as opposed to Individualism. Taiwanese have a tight family
style framework where they expect others in the organization to look after and protect them. In
exchange, they provide absolute loyalty to the group. ? It is a High Power Distance society where
employees show a great deal of respect for that in authority and where rank, title plus status carry
a lot of weight. That is why foreigners who want to negotiate with Taiwanese must always send a
representative who has a comparable status to his Taiwanese business partner. ? The degree of
uncertainty avoidance is high in Taiwan since one can observe a greater
Nervousness and aggressiveness in the society. Formal rules are constructed and there is less
tolerance for unusual behavior. Taiwanese are more inclined towards Quantitative or Measurable
dimensions of Life rather than Quality of Life. Values like assertiveness, acquisition of money
and material goods enjoy priority in the Taiwanese custom even though now, importance is
being put by some sections of the society on Quality of Life by putting emphasis on importance
of relationship, sensitivity and concern for welfare of others.

Capital Market Dynamics

Foreign Exchange The New Taiwan dollar (TWD) will likely return to a measured
appreciating path, recording annual gains of around 1% vis--vis the US dollar (USD). We
expect an approaching improvement in domestic economic conditions, progress in relations with
the Peoples Republic of China (PRC), and continued large current account surpluses to provide
support to the currency, taking it to USDTWD28.75 by the end of 2013.
Sovereign Debt & Credit Ratings Taiwan continues to enjoy the benefits of a solid
investment grade sovereign credit rating by major international credit rating agencies (current
long-term foreign-currency ratings are: Moodys: Aa3, Standard & Poors (S&P): AA-, and
Fitch: A+), reflecting a very strong net external creditor position, sound monetary
management, and a resilient economy supported by a dynamic and competitive information
technology sector. Taiwans gross public debt remains at manageable levels, averaging 40% of
GDP in 2013-14.

Taiwan Economy
Economy - overview: Taiwan has a dynamic capitalist economy with gradually decreasing
government guidance of investment and foreign trade. Exports, led by electronics, machinery,
and petrochemicals have provided the primary impetus for economic development. This heavy
dependence on exports exposes the economy to fluctuations in world demand. In 2009, Taiwan's
GDP contracted 1.9%, due primarily to a 20% year-on-year decline in exports. In 2010 GDP
grew 10.9%, as exports returned to the level of previous years, and in 2011, grew 4%. However,
2012 growth fell to just 1.3%, because of softening global demand. Taiwan's diplomatic
isolation, low birth rate, and rapidly aging population are major long-term challenges. Free trade
agreements have proliferated in East Asia over the past several years, but so far Taiwan has been
excluded from this greater economic integration - with the exception of the landmark Economic
Cooperation Framework Agreement (ECFA) signed with China in June 2010 - in part because of
its diplomatic status. Follow-on components of ECFA, including deals on trade in goods and
services, have yet to be completed. The MA administration has said that the ECFA will serve as
a stepping stone toward trade pacts with other key trade partners, and talks with Singapore on a
deal began in 2010. Taiwan's Total Fertility rate of just over one child per woman is among the
lowest in the world, raising the prospect of future labor shortages, falling domestic demand, and
declining tax revenues. Taiwan's population is aging quickly, with the number of people over 65
accounting for 10.9% of the island's total population as of 2011. The island runs a large trade
surplus largely because of its surplus with China, and its foreign reserves are the world's fourth
largest, behind China, Japan, and Russia. In 2006 China overtook the US to become Taiwan's
second-largest source of imports after Japan. China is also the island's number one destination
for foreign direct investment. Three financial memorandums of understanding, covering banking,
securities, and insurance, took effect in mid-January 2010, opening the island to greater
investments from the mainland's financial firms and institutional investors, and providing new
opportunities for Taiwan financial firms to operate in China. Closer economic links with the
mainland bring greater opportunities for the Taiwan economy, but also poses new challenges as
the island becomes more economically dependent on China while political differences remain
unresolved.

Taiwan GDP (purchasing power parity)

GDP
(purchasing
power
$890.2
billion
$855.7
billion
note: data are in 2012 US dollars

parity): $901.9

billion
(2011
(2010

(2012

est.)
est.)
est.)

Taiwan GDP (official exchange rate)

GDP (official exchange rate): $466.1 billion (2012 est.)

Taiwan GDP - real growth rate

GDP real Growth Rate: 1.3% (2012 est.)

Taiwan GDP - per capita (PPP)

GDP - per capita (PPP): $38,500 (2012 est.)

Taiwan GDP - composition by sector

GDP Composition By Sector:
Agriculture: 1.8%
Industry: 29.6%
Services: 68.6% (2012 est.)

Taiwan Labor force

Labor force: 11.3 million (2012 est.)
Taiwan Labor force - by occupation
Labor force - by occupation: agriculture: 5.2%
industry: 35.9%
services: 58.8% (2010 est.)

Taiwan Unemployment rate

Unemployment rate: 4.3% (2012 est.)

Taiwan Population below poverty line

Population below poverty line: 1.16% (2010 est.)

Taiwan Household income or consumption by percentage share

Household income or consumption by percentage share: lowest 10%: 6.4%
highest 10%: 40.3% (2010)

Taiwan Distribution of family income - Gini index

Distribution of family income - Gini index: 32.6 (2000)

Taiwan Investment (gross fixed)

Investment (gross fixed): 20.1% of GDP (2012 est.)

Taiwan Budget
Budget: revenues: $78.97 billion
expenditures: $92.44 billion (2012 est.)

Taiwan Taxes and other revenues

Taxes and other revenues: 16.9% of GDP (2012 est.)

Taiwan Budget surplus (+) or deficit (-)

Budget surplus (+) or deficit (-): -2.9% of GDP (2012 est.)

Taiwan Public debt

Public debt: 39.2% of GDP (2012 est.)
34.7% of GDP (2011 est.)

Taiwan Inflation rate (consumer prices)

Inflation rate (consumer prices): 2.3% (2012 est.)
1.4% (2011 est.)

Taiwan Central bank discount rate

Central bank discount rate: 1.625% (31 December 2010)
1.25% (February 2009)

Taiwan Commercial bank prime lending rate

Commercial bank prime lending rate: 2.9% (31 December 2012 est.)
2.88% (31 December 2011 est.)

Taiwan Agriculture - products

Agriculture - products: rice, vegetables, fruit, tea, flowers; pigs, poultry; fish

Taiwan Industries
Industries: electronics, communications and information technology products, petroleum
refining, armaments, chemicals, textiles, iron and steel, machinery, cement, food processing,
vehicles, consumer products, pharmaceuticals

Taiwan Industrial production growth rate

Industrial production growth rate: 5% (2011 est.)

Taiwan Current Account Balance

Current Account Balance: $40.88 billion (2012 est.)
$41.6 billion (2011 est.)

Taiwan Exports
Exports: $288.2 billion (2012 est.)
$307 billion (2011 est.)

Taiwan Exports - commodities

Exports - commodities: electronics, flat panels, machinery; metals; textiles, plastics, chemicals;
optical, photographic, measuring, and medical instruments

Taiwan Exports - partners

Exports - partners: China 28.1%, Hong Kong 13.8%, US 11.5%, Japan 6.6%, Singapore 4.4%
(2010 est.)

Taiwan Imports
Imports: $261.6 billion (2012 est.)
$279.2 billion (2011 est.)

Taiwan Imports - commodities

Imports - commodities: electronics, machinery, crude petroleum, precision instruments, organic
chemicals, metals

Taiwan Imports - partners

Imports - partners: Japan 20.7%, China 14.2%, US 10%, South Korea 6.4%, Saudi Arabia
4.7% (2010 est.)

Taiwan Reserves of foreign exchange and gold

Reserves of foreign exchange and gold: $391 billion (31 December 2012 est.)
$390.6 billion (31 December 2011 est.)

Taiwan External debt

External debt: $127.4 billion (31 December 2012 est.)
$125.7 billion (31 December 2011 est.)

Taiwan Stock of direct foreign investment - at home

Stock of direct foreign investment - at home: $58.4 billion (31 December 2012 est.)
$56.15 billion (31 December 2011 est.)

Taiwan Stock of direct foreign investment - abroad

Stock of direct foreign investment - abroad: $220.8 billion (31 December 2012 est.)
$213.1 billion (31 December 2011 est.)

Taiwan Exchange rates

Exchange rates: New Taiwan dollars (TWD) per US dollar 29.68 (2012 est.)
29.47 (2011 est.)
31.648 (2010 est.)

33.061 (2009)
31.53 (2008)

IMPORT POLICIES
Tariffs
When Taiwan became a WTO Member in January 2002, the authorities implemented tariff-rate
quotas (TRQs) on small passenger cars and 16 agricultural products. On January 1, 2007, in
accordance with its WTO commitments, Taiwan made additional tariff cuts and increased TRQ
amounts on these products. Beginning January 2011, Taiwan fully eliminated TRQs on small
passenger cars. In addition, the commodity tax on small passenger cars dropped from 35 percent
to 30 percent. This tax is waived for electric cars until 2014 in an effort to promote energy
conservation. Taiwan maintains Special Safeguards (SSGs) for a number of agricultural products
covered by TRQs.
SSGs, which are generally permitted under Article 5 of the WTO Agreement on Agriculture,
allow Taiwan to impose additional duties when import quantities exceed SSG trigger volumes or
import prices fall below SSG trigger prices. Because Taiwan previously did not import many of
these products, SSG trigger volumes are relatively low. Over the last few years, Taiwan has
applied SSG provisions in several agricultural product categories, including poultry, certain
types of offal, and milk. U.S. industry continues to request that Taiwan lower tariffs on many
goods, including large motorcycles.

Marketing Prospective
Taiwans foreign commerce is to the tune of USD85.1 billion for c.i.f. total imports and USD93
billion for f.o.b. exports (1994 est). It has a per capita of USD 12070 with real growth rate of 6%
(1994 est). Principal trading partners are Japan, USA, EU for imports, and USA, Hong Kong, EU
and Japan for exports (Refer: Bureau of Statistics, Taiwan). There is an increase in the demand
of consumer durables, with more women joining the workforce. However, due to the smaller size
of the Taiwanese homes, large capacity refrigerators / freezers or other such items are not
marketable. The companies have gone for modifying the size of their home appliances.

Foreign Investment
Taiwan welcomes foreign investment, and in principle, it will open all sectors of its economy to
foreign investment except in areas involving national security or causing potential environmental

damage. All applications for investments approval, acquisitions and mergers are screened by the
Foreign Investment Commission (FIC), Ministry of Economic Affairs (MOEA). Approvals are
being guided among other things by the Statue for Investment by Foreign Nationals (SIFN) and
the Statue For Investment by Overseas Chinese (SIOC). A Negative List adopted in July 1990
specifies industries closed and restricted to foreign investment. This would mean that 10% of the
391 industries in Taiwan will have restrictions. These include service industries like reinsurance
and legal services. If you need to set up an industrial zone, this will take 56 months after vetting
by 43 agencies (Refer: Dun & Bradstreet Information Service).

Environment Protection
Taiwan spends enormous money to protect the environment, following decades of neglect amid
rapid industrial development on a relatively small island. Local concerns about the environment
have swelled into a major domestic political issue which in turn is pushing the business
development. Rising income standard has led to increasing sophistication about environmental
damage. Through the Taiwan Pollution Control Equipment Manufacturing Association
(TPCEMA), it is working to channel burgeoning outlays for pollution control products away
from foreign concerns and towards local companies. The Environmental Industry has been
identified as strategic in the Six Year National Development Plan in 1991, as shown in the
following table:

Financial Sector
A future exchange has been established following the re-launching of over the counter stock
exchange in 1996. A new category of bank similar to the merchant bank is in the process of
establishment. Capital markets are being liberalized with new financial instruments whilst
monetary authorities have pledged to lift capital controls by 2000.

WTO (World Trade Organization)

Unlike its highly visible but fruitless attempts to join the UN, the island approach to WTO entry
has been at a low key but it seems to be more productive. It has reached agreement with 21 of the
26 WTO member countries. However it is worth noting that the remaining 5 members are the
USA, the EU, Canada, Switzerland and Singapore with whom negotiations are expected to be
tough. Taiwans Board of Foreign Trade (BOFT) which is responsible for all these negotiations
indicated that thorny issues include requirement by countries like USA for a bigger market for
their wheat. This would threaten Taiwans main rice industry. Singapore requests for more
market for its electronic products but the main contention between these countries involve
agriculture products. The membership of WTO will have profound affect for Taiwan. Sunset
industries like car production and agriculture will suffer as tariff drop as cheaper products are

allowed in. The other issue for entry is the possible blockage by PRC which has made known
its intention to be in WTO first before Taiwan. But the PRC is nowhere ready for the WTO
membership.

Strength Through Trade

Taiwan being the 14th Largest Trading Economy (1992) has trade surplus with all major
economic powers except Japan. It has strong export base and a trade surplus, with minimal
foreign debt. (Refer: MOEA)
With the US it has the 2nd highest trade surplus. US has been asking for reduction in the deficit
by eliminating barriers to US imports and investments. The US Congress is thinking of
protectionist measures especially in products where the components are supplied from Taiwan
but assembled and exported through the PRC.

Channels of Distribution
These are three major channels of distributions:
Private Traders importers and wholesalers who buy and sell for their accounts.
End Users Manufactures, public utilities and other institutional buyers.
Public Trading Agencies Agencies set-up by the government such as the Central Trust of
China, and Taiwan Supply Bureau. The general practice is to launch a company, with a local,
non-exclusive distributor who handles the first few orders from end users. This is, then, followed
by an appointment of a local exclusive agent to handle the marketing.
The Seven Ways to approach the Taiwan Market are:
Establish a Representative Office: This is for a product, requiring heavy after sales service, for
examples computers and household appliances.
Exhibit at Trade Fairs: Preferred for new products.
Get a Distributor or Agent: If a product has strong competitors, this is the preferred way.
Examples include electronic and heavy machinery.
Do Direct Marketing: Preferred for consumer products like auto part and accessories.
Open your own Distributorship or Retail Stores: Preferred for companies that have a large array
of products.

Negotiate a Joint Arrangement with a local company: Commonly for products that are of high
technology, protected by copyright and intellectual property.
Enter a Bid on projects: Primarily for sales to public organizations.
No special law is available to regulate termination of agency agreements and either party can
terminate the services without incurring liabilities by giving notice to either party provided there
is no breach of contract.
Taiwan has agreed to adhere to the GATT Uruguay Round Agreement on Government
Procurement as part of its accession agreement with the WTO. Technically complex tenders are
led by the Central Trust of China (CTC) which a multifunction government is owned financial
enterprise supervised by the Ministry of Finance. Procurement procedures have to also abide by
the Law of Audit. Taiwans Industrial Cooperation program (ICPs) requires foreign vendors to
propose programs that transfer technology, procure locally and assist in marketing. They hope,
this will nurture strategic industries and upgrade their technology base.

The manufacturers have to adhere to the growing demand for respect for consumer rights. This
can be seen from the recall of the defective products, the push by the Consumers Federation for
more comprehensive consumer legislation, and suggested provision of toll-free service numbers
by manufacturers.

Advertising
Taiwan is not relatively dependent on radio and television advertising even though it has a well
developed and an extensive radio and television network. Newspaper is the main avenue for
advertising accounting for 40% of all advertising spending. 7% is taken up by magazines.
Television accounts only for 33% of the advertising spending and radio 7%. Taiwan has about 24
advertising agencies but they serve as managers for campaigns developed by foreign parent
companies and rarely do any local creative work.

Managing the PRC & Taiwan Conflict

The conflicts between PRC (Mainland China) and Taiwan are both Functional and Dysfunctional
Conflicts. It is a Functional Conflict situation since it has caused the government to outline
economic strategies which are global in nature. It has effectively brought Taiwan to be one of the
Asian Tigers and motivating it to work harder to enter the WTO club. On the other hand it is
dysfunctional in nature situationally but is less obvious. The psychological fear and pressure put

by PRC caused some companies to reduce its operation in Taiwan especially during the 1996
Presidential election.

Taiwanese

Strengths,

Weaknesses,

Opportunities

and Threats (SWOT)

Taiwans main strengths are its strong economic fundamentals, trained and skilled labor and a
well-established infrastructure. Its strategic location next to the PRC is important to the USA and
Japan. Furthermore, it has strong Chinese connections; and, hence, Taiwanese understand the
PRC issues better. Therefore, it can act as the bridge between other countries who want to do
business in the PRC. It weaknesses is its low natural resources, shortage of labor and unfavorable
land conditions which are mostly hilly. Opportunities are in abundance in Taiwan since
Taiwanese people are ever willing entrepreneurs. Threats come from its status vis-vis the PRC
especially since it is being looked upon by the PRC as one of its territories. The high labor cost is
also causing products to become expensive. Corruption and rivalry both in business as well as
politics could lead to fragmentation of the business confidence in Taiwan.

What Advantage Does Taiwan Have? The Rug man Verb eke Model
Based on the Rugman Verbeke Model, there are two possible specific advantages a country can
have: Firm Specific Advantage (FSA) where it is based on factors such as patent, technology and
customer loyalty; and Country Specific Advantage (CSA) based on political stability, peoples
sincerity, education and technology. For Taiwan, its Competitive Advantage is driven by Firms
Specific Advantage (FSA) where companies produce innovative products, known for their
quality and performance. As a country, it has a lot of disadvantage such as threat from mainland
China and lack of natural resources.

Taiwanese Companies Deciding between Globalization & National

Responsiveness
A survey done by Asia, Inc & Arthur D. Little named Acer Inc. (Computer Industry, Sales
US2360mil-1995), Taiwan Semiconductor Manufacturing Co. (Semiconductor Industry; Sales
US108mil-1995), United Microelectronics Corp (Semiconductors Industry; Sales US915mil
1995), Mosel Vitelec Inc. (Semiconductor Industry; Sales US516mil-1995) & Evergreen Marine
Corp (Shipping/Aviation Industry; SalesUS1187mil-1995) as the 2nd, 6th, 18th, 21st, & 32nd
Asias 50 Most Competitive Companies in Asia respectively. (Refer: Asia Inc, June 1997).
Basically, these companies started locally before going global with their products. Commonly
MNCs do no prefer to go nationally since the market is small and a global market provides better
control for business. National competitiveness demands an understanding of the different

consumer tastes in the different national market segments and can lead to decentralization.
Globalization on the other hand requires the production and marketing of homogenous products
worldwide as demonstrated by Acer Inc. Using the Globalization-National Responsiveness
Model, we can evaluate the status of the companies mentioned as follows:
The companies like Acer Inc. are in the quadrant of High-Globalization, Low-National
responsiveness based on their products, at the moment (Acer expanded globally by using its own
PC brand and by producing products locally- Refer: Asia Inc. June, 1997)
In order to maintain global business, the Taiwan Government plays an important role in the four
main areas of:
Maintaining economic competitiveness by producing quality products and moving towards the
high technology sector. Influencing trade regulations as demonstrated by its lobbying to join
WTO and also the setting up of various agencies such as Foreign Investment Commission, and
also liberalizing he money market.
Developing a global orientation to allow companies like ACER Inc. & Taiwan Semiconductors
to operate as MNCs; and Innovating products through R&D Activities.

Reference:
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Cateora, Philip R. ,International Marketing, Chicago : Irwin, 1996, p. 302.
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Other Source: CIA World Factbook - Unless otherwise noted, information in this page is
accurate as of February 21, 2013